An Index for Any Asset: The Historic Stocks Market (HSTM) Index

The plethora
of investment indices continues to grow. Whatever the asset class, there is an
index to accommodate it, whether its stocks, bonds, commodities, property, art,
fine wine, etc.

But what
about an index that tracks the market value of a basket of historic bond and
share certificates? A group of scripophily experts joined forces recently to
develop one. The traded securities don’t have any “intrinsic” value, they
are just financial esoterica that, for various reasons, have significant
historical or decorative value.

The Historic Stocks Market (HSTM) Index tracks the auction prices of 100 “representative” share and bond
certificates and is updated every six months to incorporate the latest realized
sale values. Since its inception in late 2012, the index has risen by
approximately 25%.

The Historic Stocks Market (HTSM) Index

Methodology
Note: Each component has a 1% weight in the index and had its value rebased to
100, based on its auction price before 31 December 2012. Prices are
derived from the following scripophily auctioneers: HWPH, Scriposale, FHW, HSK,
Boone, and Spink London. All prices used in the calculation are net prices
without commissions, fees, or taxes. The index base currency is
euros. Source: hstm-index.com

Index Constituents

The
index features a broad spectrum of historic certificates ranging in age,
geography, and industry. The index’s timespan covers a wide gamut, with
securities issued in the early 17th century to the late 20th century. Of the
100 historic items, 58 are European in origin and 16 are North American, with
Asia, Australia, Africa, Central, and South America accounting for the
remainder.

Current
auction values range between €60 to €30,000. In that sense, the market
represents the full scope of scripophily — the collection and study of old
stock and bond certificates. While the certificates are rare, they are not so
extraordinary that they never come up for auction. For each piece, there are
typically between 15 and 50 known to exist.

Volker
Malik, editor of the HSTM Index, explains:

“The
intention was not only to supply the market with a guideline for collectors who
might consider their hobby being a kind of investment . . . [but] that the
Index should also provide people with ideas on ‘how to collect’ as there is a
span over different countries, industries, and types. Someone might use the
index as a base to start a worldwide scripophily collection in the context of
‘which papers should I have in my collection’ — and then [others] could expand
this basic collection by further items as they like.”

Perhaps the
most historically significant certificates are those of the Dutch East India
Company (Vereenigde Oost-Indische Compagnie- VOC). Established in 1602, it was
the first firm to offer stocks and bonds to the general public and to have its
securities listed and freely traded on a public stock exchange. The first known
warrant, again of Dutch origin, is also included in the HSTM Index. The warrant
entitles its owner to purchase six shares of the Imperial Indian Company
(Kaiserlich-Indische Compagnie) at 103%, by 25 August 1730.

Shares
signed by illustrious business leaders and entrepreneurs are also well
represented:

Dutch East
India Bond, dated 1623. With only six to 10 known to exist, these bonds are
among the rarest securities included in the HSTM Index. The last to be
auctioned earned a hammer price of €30,000. Illustration courtesy of hstm-index.com.

Shares
issued by the Suez and Panama Canals, The Pilsner Brewery, The Ford Motor
Company of Canada, The Hongkong & Shanghai Banking Corp. (HSBC), Hispano
Suiza, Madame Tussaud’s, Siemens, and The Stockton & Darlington Railway Co.
are also included in the HTSM Index.

A number of
certificates have considerable aesthetic as well as historical value. The
shares of Fabrica de Faiancas das Caldas da Rainha, designed by Raphael
Bordallo Pinheiro, are especially appealing. Printing involved a complex manual
process using 11 different colors. Another sought-after certificate is the
Paris France Société Anonyme, illustrated by Alphonse Mucha.

The
Portuguese share certificate of Caldas da Rainha (Thermal Springs of the
Queen), dated 1884, is among the more decorative share certificates ever made.
Its latest auction value was €1,800. Illustration courtesy of hstm-index.com.

Detail from
Paris-France Société Anonyme Bond, 1898, illustrated by Alphonse Mucha. Between
11 and 50 of these certificates are known to be extant. Its latest auction
price was €301. Illustration courtesy of hstm-index.com.

While the
HSTM Index provides a useful price barometer for both investors and collectors,
it should also pique the interest of those new to scripophily. Finance
professionals, in particular, can appreciate such tangible relics of financial
history as these old stocks and bonds. Indeed, there are few better ways to
decorate the offices of banks, brokerages, or fund management companies than
with some well-chosen stocks and bonds certificates.

All posts are the opinion of the author. As such, they should not be
construed as investment advice, nor do the opinions expressed necessarily
reflect the views of CFA Institute or the author’s employer.

Image
Credit: Share certificate of the Standard Oil Company, dated 1882, with
the original signature of John D. Rockefeller. Between 101 and 250 of these
certificates are known to be extant. The latest auction value was €3,343.
Courtesy of hstm-index.com.